Indiana Good Funds

 HOUSE ENROLLED ACT No. 1374

 http://www.realtownblogs.com/uploads/RACI_HEA_1374.pdf

http://www.realtownblogs.com/uploads/RACI_ILTA_Special_Edition_Q__As.pdf

Indiana Case Law

Emily Campbell v. Federal Home Loan Mortgage Corp., et al., 2009 WL 395207, S.D. Ind., February 13, 2009. 

Plaintiff Emily Campbell suffered injuries after she fell down a flight of stairs at a house she was viewing for potential purchase.  The incident occurred as she opened a door that she thought was the pantry but actually was the door to the basement.  The plaintiff opened the door and felt for a light switch, as it was very dark inside.  While trying to locate the switch, she lost her balance and fell down the stairs.  While there was a light switch near the door that she had opened, the switch was not working.  She and her husband sued the owner of the home, Federal Home Mortgage Corp.; the listing broker; the Buyer’s representative and the Buyer’s representative’s broker.  The United States District Court for the Southern District of Indiana ruled in favor of all the defendants.  As for the claims against the owner, the Court ruled that the facts of the case did not show that the Owner violated its duty of reasonable care (the standard of care a property owner owes to “invitees” to his/her property).  In so doing, the Court determined that because the plaintiff testified she lost her balance and fell down the stairs, it did not matter whether the stairs were dark.  The condition of the property had nothing to do with her injuries.  Next, the Court considered the allegations against the Listing Broker and the Buyer’s Representative and their Broker.  Indiana courts have held that real estate licensees who do not control the property have no duty to inspect the property in order to warn prospective buyers about potentially dangerous conditions; instead, they only have a duty to warn prospective buyers about hidden dangers on the property of which the licensee is aware.  The stairway in this case was not a hidden defect on the property nor did it pose a risk of harm.  Therefore, the court ruled in favor of the licensees on these allegations.  However, the Court denied the Buyer’s Representatives’ request for attorney fees to be paid by the Plaintiff.  Indiana law allows a party to recover its attorney’s fees when the court finds that a claim or defense has no legal basis (or if there is a contract that provides for it).  While the Court agreed that the Plaintiff should have dismissed the Buyer’s Representative prior to judgment, the Court found that the standard for determining that accusations were baseless is high and the Plaintiff’s lawsuit did not fall into the frivolous category. 

CONTRACT & EARNEST MONEY

Randall & Linda West v. Theodore & Catherine Retmier, 2009 WL 736157, In. Ct. App., March 19, 2009. 

The Buyer received a “Pre Qualification Certificate” from their lender and subsequently, on June 5, 2003, entered into a Purchase Agreement with the sellers on the purchase of a home.  The Buyers submitted $1,500 in earnest money.  Buyers submitted information to the mortgage company timely however, on June 24, 2004, the mortgage company faxed two statements of credit denial to the Buyer and indicated that the denial was based on “Delinquent Past or Present Credit Obligations with Others.”  The Buyer contacted their real estate agent and provided copies of the mortgage denial letters and informed her it would not be possible for them to obtain mortgage approval by the July 1^st deadline declared in the contract.   As a result, Buyers signed a Mutual Release form, requesting return of earnest money, which was sent to Seller’s agent on June 25^th along with a copy of the mortgage denial letter.  The following day the Sellers responded in writing by instructing the Buyers to contact a certain mortgage loan originator by the close of business and, that in the event Buyer’s could not obtain financing through that named originator, earnest money would be returned to Buyer.  However, if Buyers refuse to contact that mortgage company, Buyers will forfeit the earnest money to Seller.  In addition, Seller indicated they would seek any and all liquidated damages from the Buyers.  The Buyers refused to take any additional steps to obtain financing and, on April 26, 2004 the Buyers filed a lawsuit seeking the return of their earnest money.  The trial court held that the Buyer’s ability to obtain financing was a condition precedent to the contract and that their actions constituted a reasonable, good faith effort to obtain financing.  The trial court also concluded that the demand by the Sellers that the Buyers seek financing through a specific broker three days prior to the financing deadline was unreasonable.  Further, the trial court held that the Sellers had a duty to execute the mutual release for the return of the earnest money and, that by failing to release the funds, the Sellers breached their contractual duty.  As such, the trial court ordered judgment in favor of the Buyers for the amount of the earnest money and for reasonable attorney’s fees, pursuant to the Purchase Agreement.  The Sellers appealed the decision alleging that the trial court wrongfully concluded: 1) that the Buyers were not in breach of the contract because they made a good faith effort to obtain financing; 2) that the Seller’s breached the Purchase Agreement by failing to sign the Mutual Release form and return the earnest money to the Buyers; and 3) the award of attorney’s fee to the Buyers. The Court of Appeals affirmed the trial court on all three points.  In analyzing the Buyer’s duty to make a good faith effort to obtain financing, the Court noted, “A good faith effort is defined as what a reasonable person would determine is a diligent and honest effort under the same set of facts or circumstances.”  Since the Buyers had made application and, further, that no admissible evidence was presented by the Sellers that the Buyers took any steps to sabotage the approval process, the Court found it to be a good faith effort.  On the second point, the court noted that, “[w]hile it may be a customary method of recognizing the termination of a purchase agreement, no term of the purchase agreement required the parties to sign a Mutual Release upon termination.”  The term which came into play was whether the Sellers were required to return the earnest money.  The Purchase Agreement provided: “If this offer is accepted and Buyer fails or refuses to close the transaction, without legal cause, the earnest money shall be forfeited by the Buyer to Seller as liquidated damages.”  Since the Buyers had legal cause for not closing, the court held that the Sellers were required to return the earnest money to the Buyers.  As for attorney fees, the Purchase Agreement contained the following: “[a]ny party to this Agreement who is the prevailing party in any legal or equitable proceeding against any other party brought under or with relation to the Agreement or transaction shall be additionally entitled to recover court costs and reasonable attorney’s fees from the non-prevailing party.”  The noted that, not only did the Purchase Agreement have the attorney fee clause, but that once the Sellers refused to return the earnest money deposit, the only way the Buyers could recover the funds was by filing a lawsuit.

Pride v. Christian, 895 N.E.2d 741 (Table), No. 64A05-0802-cv-59, Ind. Ct. App., October 30, 2008. 

Buyer was found in breach of Purchase Agreement on a home with a purchase price of $214,900 for his failure to finalize the loan or respond to mortgage broker’s inquiries after having received an approval letter.  As a result of the breach, buyer was ordered to pay the Sellers $14,200 damages (calculated as follows: (1) the difference between the agreed upon purchase price for the sale of the house to Buyer and the later sale of the house to a new buyer ($9,900); (2) the cost of the home inspection ($300); (3) the cost of refinancing costs incurred by the Sellers ($3,000); and the cost of additional mortgage payments on the house Buyer was to purchase ($1,000).  Buyer also had to pay Sellers attorney fees and court costs of $10,916.54.  Further, Buyer had to pay the real estate broker involved the $2,500.00 broker fee which had been agreed upon as well as the broker’s attorney costs of $4,000.00.

Drew and Donna Dickerson v. Donna Strand and Gloria German, No. 54A01-0807-CV-334 (Ind. Ct. App. April 24, 2009).

   The Court of Appeals has asked the Supreme Court to re-examine the common law rule that a residential real estate buyer may not rely upon a seller's assertions regarding the property where the buyer has a reasonable chance to inspect the property in light of Indiana's disclosure form statute.

   "We encourage our Supreme Court to re-evaluate the social value of a rule allowing a seller of property to lie with impunity as long as the prospective buyer had a reasonable opportunity to inspect the property.  But until then, we are bound by that rule." 

First Time Home Buyer 2009- Tax Credit

For more information on the 2009 First Time Home Buyer Tax credit, Click here: 

http://www.realtownblogs.com/uploads/RACI_1st_Time_Home_Buyer_Tax_Credit.pdf